Question

difference between formal sector loan and informal sector loan

Answer 1

Hey dude,

❦Formal sector loan required collateral where as informal sector loans does not require collateral.

❦Formal sector loans has a low rate of interest where as informal sector loans has a very high rate of interest.

❦Formal sector loan: They are supervised by the Reserve bank of India.

@Collins Key

Answer 2

Answer:

Formal source of credit:

(a)  Loans that are given by banks and co-operative institutions are called Formal sector of credit.

(b)  The functioning of these banks and co-operative institutions are supervised by Reserve Bank of India- RBI.

(c)  These institutions are required to report to the RBI the rate of interest, amount lending, etc.

(d)  Borrower is required to submit collaterals and documents.

Informal source of credit:

(a)  Loans that are given by money lenders, friends and relatives are called Informal source of credit.

(b)  They are not supervised by Reserve Bank of India - RBI.

(c)  They can lend money at any interest rate and use any means to get back their money.  

(d)  Borrower is not required to submit collaterals and documents